A shortage of residential real estate in Dubai is directing the attention of investors and developers towards the luxury hotel apartment market in search of high-yield opportunities.
As the Emirate gears up to host the 2020 World Expo, authorities are pouring investment into its tourism infrastructure ahead of the event, creating a shortage of family-sized residential units.
Rooms and apartments in four and five star hotels in city and resort locations are being bought off-plan by investors electing to use their units to generate rental income.
Hotel room investment surges in popularity
Income generating property assets have been rising steadily in appeal across major international property markets since the recession, with investors seeking safe havens for their capital.
Dubai's property market crashed spectacularly following the financial crisis with apartments losing more than 60% in capital value over a period of months during 2009. Anxious not to repeat history, Dubai's government has been pro-active in restoring stability to its property market by shifting its reliance on oil-related sectors and driving investment towards tourism.
Emaar's The Address hotel brand is expanding in Downtown Dubai
As a consequence, interest in Dubai's tourism-related real estate market is surging. Two of the largest developers in the UAE - Emaar and Damac – have formed their own hotel management companies and are already operating hotels. Emaar's The Address hotels are expanding rapidly with several new properties under construction in Downtown Dubai.
Investor demand driving growth in hotel investment
Dubai has numerous hotel projects in its development pipeline including hotel resorts from international brands such as Nikki Beach, Hard Rock and Intercontinental Hotels Group. As the Emirate steps up its preparations for the 2020 World Expo, hotel investment opportunities are becoming more widely available.
Dubai's most ambitious tourist development is Dubailand, an entertainment complex that is expected to open ahead of 2020. The tourism, real estate, hospitality, entertainment, leisure and retail mega project under development will cover an area of 279 million square metres, twice the size of Florida's Walt Disney World Resort.
Dubailand will be twice the size of Florida's Disney World Resort
Dubailand is being managed by the government's Dubai Development and Investment Authority (DDIA) and will secure the Emirate as the premier tourist destination for the Middle East.
Dubailand expected to turn Dubai into Middle East tourist hub
A significant development on the Dubailand site was announced earlier this month. The St. Regis Dubai Al Habtoor Polo Resort & Club, scheduled for completion in 2017 will be a landmark project just 25 minutes from Dubai International Airport. Developers Starwood Hotels & Resorts have a strong brand presence in the international polo community and the new resort is expected to attract an additional 15 million tourists to Dubai each year once its doors open.
Bart Carnahan, senior vice president of Starwood said: “The UAE is our largest market in the Middle East and we continue to see opportunities to grow our brand portfolio across the country. This signing will strengthen Starwood's portfolio in Dubai as we continue to strategically expand our luxury footprint in the region”.
- Wednesday 25 March 2015